Circular Merger


DEFINITION of 'Circular Merger'

A transaction to combine companies that operate within the same general market but offer a different product mix. A circular merger is one of the three types of mergers, the other two types being vertical and horizontal mergers. A company engages in a circular merger to offer a greater range of products or services within their market.

BREAKING DOWN 'Circular Merger'

A circular merger can be risky if the acquiring company does not have specific expertise within the targeted market segment. Sometimes, expanding offerings too far from the company's expertise can lead to greater inefficiency, rather than the economies of scale that are often hoped for. However, the acquiring company can benefit from economies of scale and the sharing of distribution channels.

  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
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    A period of time with significant merger and acquisition activity ...
  3. Black Knight

    A company that makes a hostile takeover offer for a target company. ...
  4. Merger

    The combining of two or more companies, generally by offering ...
  5. Poison Pill

    A strategy used by corporations to discourage hostile takeovers. ...
  6. Transaction

    1. An agreement between a buyer and a seller to exchange goods, ...
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  1. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  2. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  3. What are some ways to make a distribution channel more efficient?

    While there are many ways to make a distribution channel more efficient, the three high-level ways to increase the efficiency ... Read Full Answer >>
  4. How is a tender offer used by an individual, group or company seeking to purchase ...

    A tender offer is made directly to shareholders in a publicly traded company to gain enough shares to force a sale of the ... Read Full Answer >>
  5. How does a company record profits using the equity method?

    A company that invests in another company and has majority control of it would record profits using the equity method. This ... Read Full Answer >>
  6. How does horizontal integration allow companies to share resources?

    In a horizontal integration, a company either acquires another company or merges with that company. This allows the resulting ... Read Full Answer >>

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